Good Mining (International) Limited

Transcription

1 Good Mining (International) Limited Consolidated Financial Statements 31 December 2017

2 Contents Abbreviations and key... 2 Introduction... 3 General information... 9 Independent auditor s report to the shareholders of Good Mining (International) Limited Consolidated statement of profit or loss and other comprehensive income Consolidated statement of financial position Consolidated statement of changes in equity Consolidated statement of cash flows Appendix A Consolidated statement of cash flows direct method Appendix B Information in other illustrative financial statements available Glossary Notes Good Mining (International) Limited

3 Abbreviations and key The following styles of abbreviation are used in this set of International GAAP Illustrative Financial Statements: IAS International Accounting Standard No. 33, paragraph 41 IAS 1.BC.13 International Accounting Standard No. 1, Basis for Conclusions, paragraph 13 IFRS 2.44 International Financial Reporting Standard No. 2, paragraph 44 SIC 29.6 Standing Interpretations Committee Interpretation No. 29, paragraph 6 IFRIC 4.6 IAS 39.IG.G.2 IAS 39.AG71 IFRS Interpretations Committee (formerly the International Financial Reporting Interpretations Committee) Interpretation No. 4, paragraph 6 International Accounting Standard No. 39 Implementation guidance for IAS 39 Section G: Other, paragraph G.2 International Accounting Standard No. 39 Appendix A Application Guidance, paragraph AG71 GAAP IASB Interpretations Committee SIC ISA 700 The commentary explains how the requirements of IFRS have been implemented in arriving at the illustrative disclosure Generally Accepted Accounting Principles/Practice International Accounting Standards Board IFRS Interpretations Committee (formerly the International Financial Reporting Interpretations Committee (IFRIC)) Standing Interpretations Committee International Standard on Auditing No. 700 Good Mining (International) Limited 2

4 Introduction This publication contains an illustrative set of consolidated financial statements for Good Mining (International) Limited (Good Mining) and its subsidiaries (the Group) that is prepared in accordance with International Financial Reporting Standards (IFRS). The Group is a fictitious, large publicly listed mining company. The Group is a gold and copper exploration, development and production entity whose activities include the exploration for, and development of, gold and copper mineral deposits and the production and sale of gold bullion and gold and copper metal concentrate. All of its operations are located in Metalville (a fictitious country). The presentation currency of the Group is the US dollar. Objective This set of illustrative financial statements is one of many prepared by EY to assist you in preparing your own financial statements. This set of illustrative financial statements is intended to reflect transactions, events and circumstances that we consider to be most common to entities in the mining sector. They are intended to illustrate IFRS disclosures specific to companies in the mining sector. Therefore, some common transactions and their disclosures have been deliberately omitted or simplified because they are illustrated in other EY illustrative financial statement publications, such as Good Group (International) Limited We refer readers to the other publications for a greater understanding of other presentation and disclosure requirements that are not specific to the mining sector. Accounting for extractive activities is complex, with a variety of accounting policy choices available for transactions in the exploration and evaluation phase. Moreover, the lack of specific guidance for certain transactions and arrangements presents the sector with a challenge to produce useful financial statements through effective presentation and disclosure. However, differences in accounting policies and their application reduce comparability and increase complexity. IFRS prescribes minimum standards of disclosure; it is important to provide additional disclosures to explain any unusual circumstances faced by the mining entity. In addition, accounting policy choices made by the entity need to be disclosed in detail to aid the reader in comparing entities in the mining sector. This publication illustrates what we consider to be relevant disclosures and focuses on those areas of IFRS reporting that rely on the professional judgement of management. For illustrative purposes only, some disclosures have been provided even though they may not be relevant or material for the Group. For instance, disclosures are provided for accounting policies that may not be relevant and/or certain disclosures are provided for items that are not material to the financial statements of the Group. We strongly encourage entity-specific presentation and disclosures. These illustrative financial statements are therefore only meant to serve as a useful reference. How to use these illustrative financial statements to prepare entity-specific disclosures Users of this publication are encouraged to prepare entity-specific disclosures. Transactions and arrangements other than those addressed by the Group may require additional disclosures. It should be noted that the illustrative financial statements of the Group are not designed to satisfy any stock market or country-specific regulatory requirements in any given jurisdiction, nor is this publication intended to reflect disclosure requirements that apply mainly to regulated or specialised industries. It is essential to refer to the relevant accounting standards and/or specific jurisdictional requirements and, when necessary, to seek appropriate professional advice where there may be doubt as to the requirements. Notations shown on the right-hand margin of each page are references to IFRS paragraphs that describe the specific disclosure requirements. Commentaries are provided to explain the basis for the disclosure or to address alternative disclosures not included in the illustrative financial statements. For a more comprehensive list of disclosure requirements, refer to EY's Online International GAAP Disclosure Checklist. If questions should arise as to the IFRS requirements, it is essential to refer to the relevant source material and, where necessary, to seek appropriate professional advice. Improving disclosure effectiveness Terms such as disclosure overload and cutting the clutter, and more precisely disclosure effectiveness, describe a problem in financial reporting that has become a priority issue for the International Accounting Standards Board (IASB or Board), local standard setters, and regulatory bodies. The growth and complexity of financial statement disclosures is also drawing significant attention from financial statement preparers, and more importantly, the users of financial statements. 3 Good Mining (International) Limited

5 Introduction continued Considering the purpose, activities and operations of Good Mining (International) Limited Illustrative consolidated financial statements for the year ended 31 December 2017, the notes have been organised according to their nature and perceived importance. The ordering of the notes is based on nine different notes sections and is summarised in the table below: Sections Comprising the following notes: 1. Corporate and Group information Corporate information (Note 1A) 2. Basis of preparation and other significant accounting policies Basis of preparation (Note 2A.1) Basis of consolidation (Note 2A.2) Significant accounting judgements, estimates and assumptions (Note 2B) Changes in accounting policies and disclosures (Note 2C) Summary of significant accounting policies (unless included with the associated quantitative and qualitative note below) (Note 2D) 3. Group structure Interests in joint arrangements (Note 3A) Group information and related party disclosures (Note 3B) 4. Significant transactions and events Business combinations acquisitions (Note 4A) 5. Results for the year Segment information (Note 5A) Operating profit/(loss) (Note 5B) Revenue (Note 5C) Income tax (Note 5D) Earnings per share (Note 5E) 6. Invested capital Exploration and evaluation assets (Note 6A) Mine properties (Note 6B) Property, plant and equipment (Note 6C) Intangible assets (Note 6D) Impairment losses (Note 6E) Commitments (Note 6F) 7. Capital and debt structure Capital management (Note 7A) Issued capital (Note 7B) Financial instruments including interest-bearing loans and borrowings, derivative financial instruments and financial instruments risk management objectives and policies (Note 7C) Changes in liabilities arising from financing activities (Note 7D) Dividends paid and proposed (Note 7E) 8. Working capital Inventories (Note 8A) Trade and other receivables (Note 8B) Cash and short-term deposits (Note 8C) 9. Other Provisions (Note 9A) Accounts payable and accrued liabilities (Note 8D) Contingencies (Note 9B) Events after the reporting date (Note 9C) Standards issued but not yet effective (Note 9D) Good Mining (International) Limited 4

6 Introduction continued The above order and grouping of notes reflects how those charged with governance of the Group viewed and managed the Group during the current period. This order and grouping also reflects the views of key stakeholders that we engaged with in the formulation of this year s financial statements. By structuring the notes according to their nature and perceived importance, users may find it easier to extract the relevant information. In addition, the significant accounting policies, judgements, key estimates and assumptions could alternatively be placed within the same note as the related qualitative and quantitative disclosures to provide a more holistic discussion for users of the financial statements. In addition, consistent with common market trends, the Group has combined the various accounting policies that were previously located in Note 2D with the related qualitative and quantitative notes. For example, the accounting policy note relating to joint arrangements now resides with the qualitative and quantitative information on joint arrangements in Note 3A. Entities may find that other structures or presentation formats and layouts are better at enhancing disclosure effectiveness. The approach summarised above and throughout these illustrative financial statements is only intended to illustrate that IFRS allows for alternative notes structures. Entities may also consider re-writing their accounting policies in plain English in order to improve readability of the financial report or increasing the use of diagrams, infographics and graphs to present information. Entities should carefully assess their entity-specific circumstances and understand the preferences of the primary users before deciding on the structure and layout of the financial statements. Applying the materiality concept requires judgement, in particular, in relation to matters of presentation and disclosure, an inappropriate application of the concept may be another cause of the perceived disclosure problem. IFRS provides a set of minimum disclosure requirements which, in practice, too often is applied without consideration of the information s relevance for the specific entity. That is, if the transaction or item is immaterial to the entity, then it is not relevant to users of financial statements, in which case, IFRS does not require that the item be disclosed. If immaterial information is included in the financial statements, the amount of information can potentially reduce the transparency and usefulness of the financial statements as the material, and thus relevant information, lose prominence. In September 2017, the IASB issued Practice Statement 2 Making Materiality Judgements. The Practice Statement gathers all the materiality requirements in IFRS Standards and it adds practical guidance and examples that companies may find helpful in deciding whether information is material. The Practice Statement is not mandatory and neither changes the existing requirements nor introduces new ones. However, entities are encouraged to consider it when making materiality judgements. As explained above, the primary purpose of these financial statements is to illustrate how the most commonly applicable disclosure requirements can be met. Therefore, they include disclosures that may, in practice, be deemed not material to Good Mining. It is essential that entities consider their specific circumstances when determining which disclosures to include. These financial statements are not intended to act as guidance for making the materiality assessments; they must always be tailored to ensure that an entity s financial statements reflect and portray its specific circumstances and its own materiality considerations. Only then will the financial statements provide decision-useful financial information. For more guidance on how to improve disclosure effectiveness, please refer to our publication Applying IFRS: Enhancing communication effectiveness (February 2017). Other illustrative financial statements We provide a number of other industry-specific illustrative financial statements and illustrative financial statements addressing specific circumstances that you may consider. The entire series of illustrative financial statements comprises: Good Group (International) Limited Good Group (International) Limited Alternative Format Good Group (International) Limited Illustrative interim condensed consolidated financial statements Good First-time Adopter (International) Limited Good Investment Fund Limited (Equity) Good Investment Fund Limited (Liability) Good Real Estate Group (International) Limited Good Petroleum (International) Limited Good Insurance (International) Limited Good Bank (International) Limited 5 Good Mining (International) Limited

7 Introduction continued International Financial Reporting Standards The abbreviation IFRS is defined in paragraph 5 of the Preface to International Financial Reporting Standards to include standards and interpretations approved by the IASB, and International Accounting Standards (IASs) and Standing Interpretations Committee interpretations issued under previous Constitutions. This is also noted in paragraph 7 of IAS 1 Presentation of Financial Statements and paragraph 5 of IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors. Thus, when financial statements are described as complying with IFRS, it means that they comply with the entire body of pronouncements sanctioned by the IASB. This includes the IAS, IFRS and Interpretations originated by the IFRS Interpretations Committee (formerly the SIC). International Accounting Standards Board (IASB) The IASB is the independent standard-setting body of the IFRS Foundation (an independent not-for-profit private sector organisation working in the public interest). The IASB members are responsible for the development and publication of IFRSs, including International Financial Reporting Standard for Small and Medium-sized Entities (IFRS for SMEs), and for approving Interpretations of IFRS as developed by the IFRS Interpretations Committee. In fulfilling its standard-setting duties, the IASB follows a due process, of which the publication of consultative documents, such as discussion papers and exposure drafts, for public comment is an important component. The IFRS Interpretations Committee (Interpretations Committee) The Interpretations Committee is a committee appointed by the IFRS Foundation Trustees that assists the IASB in establishing and improving standards of financial accounting and reporting for the benefit of users, preparers and auditors of financial statements. The Interpretations Committee addresses issues of reasonably widespread importance, rather than issues of concern to only a small set of entities. These include any newly identified financial reporting issues not addressed in IFRS. The Interpretations Committee also advises the IASB on issues to be considered in the annual improvements to IFRS project. IFRS as at 30 September 2017 As a general approach, these illustrative financial statements do not early adopt standards or amendments before their effective dates. The standards and interpretations applied in these illustrative financial statements are those that were in issue as at 30 September 2017 and effective for annual periods beginning on or after 1 January Standards issued, but not yet effective, as at 1 January 2017, have not been early adopted. For details of other standards and interpretations issued, but not yet effective, that may apply to your particular entity, refer to either the commentary sections contained herein, or to Good Group (International) Limited 2017 illustrative financial statements, for further details and the appropriate illustrative disclosures. It is important to note that these illustrative financial statements will require continual updating as standards are issued and/or revised. Users of this publication are cautioned to check that there has been no change in the requirements of IFRS between 30 September 2017 and the date on which their financial statements are authorised for issue. In accordance with paragraph 30 of IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors, specific disclosure requirements apply for standards and interpretations issued but not yet effective (see Note 9D of these illustrative financial statements). Furthermore, if the financial year of an entity is other than the calendar year, new and revised standards applied in these illustrative financial statements may not be applicable. For example, the Group has applied Amendments to IAS 7 Statement of Cash Flows for the first time in its 2017 illustrative financial statements. An entity with a financial year that commences from, for example, 1 July and ends on 30 June would have to apply these amendments for the first time in the annual financial statements beginning on 1 July Therefore, the amendments would not have been applicable in the financial statements of an entity with a year-end of 30 June 2017, unless it voluntarily chose to early adopt the amendments. Accounting policy choices Accounting policies are broadly defined in IAS 8 and include not just the explicit elections provided for in some standards, but also other conventions and practices that are adopted in applying principle-based standards. In some cases, IFRS permits more than one accounting treatment for a transaction or event. Preparers of financial statements should select the accounting policies that are most relevant to their business and circumstances. Good Mining (International) Limited 6

8 Introduction continued Accounting policy choices continued IAS 8 requires an entity to select and apply its accounting policies consistently for similar transactions, events and/or conditions, unless an IFRS specifically requires or permits categorisation of items for which different policies may be appropriate. Where an IFRS requires or permits such categorisation, an appropriate accounting policy is selected and applied consistently to each category. Therefore, once a choice of one of the alternative treatments has been made, it becomes an accounting policy and must be applied consistently. Changes in accounting policy should be made only if required by a standard or interpretation, or if the change results in the financial statements providing reliable and more relevant information. In this publication, when a choice is permitted by IFRS, the Group has adopted one of the treatments as appropriate to the circumstances of the Group. In these cases, the commentary provides details of which policy has been selected, describes the reasons for this policy selection, and summarises the difference in the disclosure requirements. Financial review by management Many entities present a financial review by management that is outside the financial statements. IFRS does not require the presentation of such information, although paragraph 13 of IAS 1 gives a brief outline of what may be included in such a report. The IASB issued an IFRS Practice Statement, Management, in December 2010, which provides a broad non-binding framework for the presentation of a management commentary that relates to financial statements prepared in accordance with IFRS. If an entity decides to follow the guidance in the Practice Statement, management is encouraged to explain the extent to which the Practice Statement has been followed. A statement of compliance with the Practice Statement is only permitted if it is followed in its entirety. Further, the content of a financial review by management is often determined by local market requirements or issues specific to a particular jurisdiction. No financial review by management has been included for the Group. Changes in the 2017 edition of Good Mining (International) Limited annual financial statements The standards and interpretations listed below have become effective since 30 September 2016 for annual periods beginning 1 January While the list of new standards is provided below, not all of these new standards will have an impact on these illustrative financial statements. To the extent these illustrative financial statements have changed since the 2016 edition, due to changes in standards and interpretations, we have disclosed the impact of those changes in Note 2C. Other changes from the 2016 edition have been made in order to reflect practice developments and to improve the overall quality of the illustrative financial statements. Changes to IFRS The following new standards and amendments became effective as of 1 January 2017: Amendments to IAS 7 Statement of Cash Flows: Disclosure Initiative Amendments to IFRS 12 Disclosure of Interests in Other Entities: Clarification of the scope of disclosure requirements in IFRS 12 from Annual Improvements Cycle Amendments to IAS 12 Income Taxes: Recognition of Deferred Tax Assets for Unrealised Losses Not all of these standards and amendments impact the Group s consolidated financial statements. If a standard or amendment affects the Group, it is described, together with the impact, in Note 2C of these consolidated financial statements. 7 Good Mining (International) Limited

9 Good Mining (International) Limited Consolidated Financial Statements 31 December 2017 Good Mining (International) Limited 8

10 General information Directors T Warington (Chairman) B Dogger (Chief Executive Officer) C Duffster R Bemberton S Rabbit M Herbert T Whelands K Choppington L Higglay F MacGillson Company Secretary M Elliottson Registered Office Gold Towers Productivity Square, Metalcity Metalville Solicitor Solicitors & Co. 7 Scott Street, Metalcity Metalville Bankers Bank Plc 10 George Street, Metalcity Metalville Auditor Chartered Accountants & Co. 17 Metalville High Street, Metalcity Metalville 9 Good Mining (International) Limited

11 Independent auditor s report to the shareholders of Good Mining (International) Limited Good Mining (International) Limited is a limited company incorporated and domiciled in Metalville and whose shares are publicly traded. Financial statements of that category of entities are usually subject to mandatory audits either under International Standards on Auditing (ISA) or local audit standards and auditor s reports should be disclosed together with the annual financial statements. However, this publication is not intended to provide guidance on the application of ISA 700 (Revised) Forming an Opinion and Reporting of Financial Statements or the specific requirements of individual jurisdictions. Hence, an illustrative auditor s report on the consolidated financial statements of Good Mining (International) Limited has not been included. Good Mining (International) Limited 10

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13 Consolidated statement of profit or loss and other comprehensive income for the year ended 31 December 2017 IAS 1.51(b) IAS 1.10(b) Year ended IAS 1.51(c) Notes US$ million US$ million IAS 1.51(d)(e) Revenue 5C 3,828 2,917 IAS 1.82(a), IAS 18.35(b)(i) Cost of sales (1,616) (1,232) IAS Gross profit 2,212 1,685 IAS 1.85,103 Other income IAS Share of profit of joint venture 3A IAS 1.82(c) Selling and distribution expenses 5B (133) (94) Other operating expenses 5B (75) (45) IAS General and administrative expenses 5B (180) (205) IAS Operating profit 1,894 1,451 IAS 1.85 Finance revenue 5C IAS 1.82(a) Finance costs (94) (40) IAS 1.82(b) Profit before income tax 1,824 1,436 IAS 1.85 Income tax expense 5D (779) (525) IAS 1.82(d), IAS Profit for the year 1, IAS 1.81A(a) Other comprehensive income IAS 1.81A(b) Total comprehensive income 1, IAS 1.81A(c) Basic and diluted earnings per ordinary share (US$ per share) 5E IAS Good Mining (International) Limited 12

14 Consolidated statement of profit or loss and other comprehensive income continued The above disclosure is an illustration of an entity that elects to present a single statement of profit or loss and other comprehensive income. It is also acceptable to present a separate statement of profit or loss and statement of other comprehensive income. The Group does not have any items of other comprehensive income. The nil line item for other comprehensive income is included for illustrative purposes only. The Group may have omitted the line item as this is nil and, hence, not material. Please refer to Good Group (International) Limited 2017 illustrative financial statements for additional details and examples of items to be included in other comprehensive income. IAS 1.10 suggests titles for the primary financial statements, such as statement of profit or loss and other comprehensive income or statement of financial position. Entities are, however, permitted to use other titles, such as income statement or balance sheet. The Group applies the titles suggested in IAS 1. IAS 1.99 requires expenses to be analysed either by their nature or by their function in the statement of profit or loss, whichever provides information that is reliable and more relevant. If expenses are analysed by function, information about the nature of expenses must be disclosed in the notes. The Group has presented the analysis of expenses by function. The Group presents operating profit in the statement of profit or loss and other comprehensive income; this is not required by IAS 1. The terms operating profit or operating income are not defined in IFRS. IAS 1.BC56 states that the IASB recognises that an entity may elect to disclose the results of operating activities, or a similar line item, even though this term is not defined. The entity should ensure the amount disclosed is representative of activities that would normally be considered to be operating. For instance, it would be inappropriate to exclude items clearly related to operations (such as inventory write-downs and restructuring and relocation expenses) because they occur irregularly or infrequently or are unusual in amount. Similarly, it would be inappropriate to exclude items on the grounds that they do not involve cash flows, such as depreciation and amortisation expenses (IAS 1.BC56). In practice, other titles, such as Earnings Before Interest and Tax (EBIT), are sometimes used to refer to an operating result. Such subtotals are subject to the guidance included in IAS 1.85A. The Group has presented its share of profit of a joint venture using the equity method under IAS 28 Investments in Associates and Joint Ventures before the line-item operating profit. IAS 1.82(c) requires share of the profit or loss of associates and joint ventures accounted for using the equity method to be presented in a separate line item on the face of the statement profit or loss. Regulators or standard-setters in certain jurisdictions recommend or accept share of the profit/loss of equity method investees being presented with reference to whether the operations of the investees are closely related to that of the reporting entity. This may result in the share of profit/loss of certain equity method investees being included in the operating profit, while share of profit/loss of other equity method investees is excluded from operating profit. In other jurisdictions, regulators or standardsetters believe that IAS 1.82(c) requires that share of profit/loss of equity method investees to be presented as one line item (or, alternatively, as two or more adjacent line items, with a separate line for the sub-total). This may cause diversity in practice. IAS 33 Earnings per Share paragraph 68 requires presentation of basic and diluted earnings per share (EPS) for discontinued operations either on the face of the statement of profit or loss and other comprehensive income or in the notes to the financial statements. The Group does not have any discontinued operations so these disclosures are not relevant. The EPS information for continuing operations is disclosed on the face of the statement of profit or loss and other comprehensive income. 13 Good Mining (International) Limited

15 Consolidated statement of financial position as at 31 December IAS 1.10(a) IAS 1.51(b)(c) Notes US$ million US$ million IAS 1.51(d)(e) Assets Non-current assets Exploration and evaluation assets 6A IAS 1.60 IAS 1.66 IAS 1.54(a), IFRS 6.15 IFRS 6.23 Mine properties 6B 4,664 3,493 IAS 1.54(a) Property, plant and equipment 6C IAS 1.54(a) Intangible assets 6D IAS 1.54(c) Inventories 8A 3 3 IAS 1.54(g) Investment in joint venture 3A IAS 1.54(e) Restricted cash 8C IAS Deferred tax assets 5D IAS 1.54(o), 56 Total non-current assets 5,964 4,456 Current assets IAS 1.60, IAS 1.66 Inventories 8A IAS 1.54(g) Trade and other receivables 8B IAS 1.54(h) IFRS 7.8(c) Cash and short-term deposits 8C IAS 1.54(i) Derivative financial assets 7C Total current assets 1,221 1,220 Total assets 7,185 5,676 Equity and liabilities Equity IAS 1.54(d) IFRS 7.8(a) Issued capital 7B 1,564 1,564 Retained earnings 3,020 2,325 Total shareholders equity 4,584 3,889 Non-current liabilities Interest-bearing loans and borrowings 7C Deferred tax liabilities 5D IAS 1.54(r) IAS 1.78(e) IAS 1.54(r) IAS 1.78(e) IAS 1.60 IAS 1.69 IAS 1.54(m) IFRS 7.8(f) IAS 1.54(o), IAS 1.56 Provisions 9A IAS 1.54(l) Total non-current liabilities 1,536 1,018 Current liabilities IAS 1.60, 69 Accounts payable and accrued liabilities 8D IAS 1.54(k) Taxes payable IAS 1.54(n) Interest-bearing loans and borrowings 7C IAS 1.54(m), IFRS 7.8(f) Provisions 9A IAS 1.54(l) Total current liabilities 1, Total liabilities 2,601 1,787 Total shareholders equity and liabilities 7,185 5,676 Good Mining (International) Limited 14

16 Consolidated statement of financial position continued IAS 1 requires an entity to present a statement of financial position at the beginning of the earliest comparative period when: it applies an accounting policy retrospectively; it makes a retrospective restatement of items in its financial statements; or reclassifies items in its financial statements (IAS 1.10(f)), and the change has a material effect on the statement of financial position. In these situations, IAS 1.40A states that an entity must present, at a minimum, three statements of financial position, two of each of the other primary statements and the related notes. The three statements of financial position include the statement of financial position as at the current annual period year-end, the statement of financial position as at the previous annual period year-end, and the statement of financial position as at the beginning of the previous annual period ( the opening balance sheet, often referred to as the third balance sheet ). There are no new standards applied during the current year which require the presentation of a third balance sheet. In accordance with IAS 1.60, the Group has presented current and non-current assets, and current and non-current liabilities, as separate classifications in the statement of financial position. IAS 1 does not require a specific order of the two classifications. The Group has elected to present non-current assets and liabilities before current assets and liabilities. IAS 1 requires entities to present assets and liabilities in order of liquidity when this presentation is reliable and more relevant. 15 Good Mining (International) Limited

17 Consolidated statement of changes in equity for the year ended 31 December 2017 Issued capital Retained earnings Total equity IAS 1.10(c) IAS 1.51(b)(c) Notes US$ million US$ million US$ million IAS 1.51(d)(e) As at 1 January B 836 1,554 2,390 Profit for the year IAS 1.106(d)(i) Other comprehensive income IAS 1.106(d)(ii) Total comprehensive income IAS 1.106(a) Issue of share capital 7B IAS 1.106(d)(iii) Dividends paid 7E (140) (140) IAS 1.106(d) (iii), 107 As at 1 January ,564 2,325 3,889 Profit for the year 1,045 1,045 IAS 1.106(d)(i) Other comprehensive income IAS 1.106(d)(ii) Total comprehensive income 1,045 1,045 IAS 1.106(a) Dividends paid 7E (350) (350) IAS 1.106(d)(iii), 107 As at 31 December ,564 3,020 4,584 The Group does not have any items of other comprehensive income. The nil line item for other comprehensive income is included for illustrative purposes only. In practice, the Group may have instead decided to omit the line item as this is nil and, hence, not material. Please refer to Good Group (International) Limited 2017 illustrative financial statements for additional details and examples of items to be included in other Good Mining (International) Limited 16

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19 Consolidated statement of cash flows for the year ended 31 December IAS 1.51(b)(c) IAS 1.10(d) Notes US$ million US$ million IAS 1.51(d)(e) Cash flows from operating activities Profit before income tax from operations 1,824 1,436 Adjustments to reconcile profit before tax to net cash flows: IAS 7.20(b) Depreciation, depletion and amortisation 5B Impairment of mine properties 6E 33 9 Impairment of exploration and evaluation assets 6E 5 6 Impairment of goodwill 6E 15 Reversal of previously impaired exploration and evaluation assets 5B (16) Unsuccessful exploration and evaluation expenditures 6A (Gain) on sale of mine properties 5B (39) (58) (Gain)/loss on sale of property, plant and equipment 5B (11) 11 (Gain) on sale of exploration and evaluation assets 5B (1) Unrealised (gain) on derivative financial instruments (2) (9) Unwinding of discount on rehabilitation 9A Share of joint venture profit (16) (25) Other non-cash income and expenses 4 2 Add: finance expense (disclosed in financing activities) IAS 7.20(c) Deduct: finance revenue (disclosed in investing activities) (24) (25) IAS 7.20(c) Working capital adjustments: IAS 7.20(a) Change in trade and other receivables 20 (399) Change in inventories 3 (21) Change in trade and other payables relating to operating activities (71) 33 IAS 7.10, 18(b) Income tax paid (584) (375) IAS 7.35 Net cash flows from operating activities 2,123 1,134 Cash flows from investing activities IAS 7.21 IAS 7.16(a) Investment in exploration and evaluation assets 6A (358) (293) Expenditures on mine development (1,246) (1,539) IAS 7.16(a) Expenditures on other intangible assets 6D (5) (4) IAS 7.16(a) Expenditures on property, plant and equipment 6C (1) (32) IAS 7.16(a) Acquisition of a subsidiary, net of cash acquired 4A (439) IAS 7.39 Proceeds on disposal of exploration and evaluation IAS 7.16(b) assets 23 Proceeds on disposal of mine properties IAS 7.16(b) Proceeds on disposal of property, plant and equipment assets IAS 7.16(b) Finance income from investing activities IAS 7.31 Net cash used in investing activities (1,914) (1,721) Cash flow from financing activities IAS 7.21 Proceeds from issuance of shares 7B 728 IAS 7.17(a) Proceeds from loans and borrowings 7D 331 IAS 7.17(c) Payments of loans and borrowings 7D (114) (32) IAS 7.17(d) Interest paid (64) (12) IAS 7.31 Dividends paid 7E (350) (140) IAS 7.31 Net cash (used in)/from financing activities (197) 544 Net increase/(decrease) in cash 12 (43) Cash and cash equivalents, beginning of period Cash and cash equivalents, end of period 8C IAS 7.45 Good Mining (International) Limited 18

20 Consolidated statement of cash flows continued IAS 7 Statement of Cash Flows paragraph 18 allows entities to report cash flows from operating activities using either the direct method or the indirect method. The Group presents its cash flows using the indirect method. A statement of cash flows prepared using the direct method for operating activities is presented in Appendix A for illustrative purposes. The Group has reconciled profit before tax to net cash flows from operating activities. However, reconciliation from profit after tax is also acceptable under IAS 7. IAS 7.33 permits interest paid to be shown as operating, financing or investing activities and interest received to be shown as operating or investing activities, as deemed relevant for the entity. The Group has elected to classify interest received as cash flows from investing activities and interest paid as cash flows from financing activities. IAS 7.16 states that only expenditures that result in a recognised asset in the statement of financial position are eligible for classification as investing activities. Therefore, if an entity adopted a policy of expensing exploration and/or evaluation costs, the related cash flows could not be classified as part of investing activities. Instead, they would need to be classified as part of operating activities. The Group capitalises exploration and evaluation assets in certain situations. Therefore, the related cash flows have been classified as investing cash flows. 19 Good Mining (International) Limited

21 Index to notes to the consolidated financial statements Section 1: Corporate and group information 1A. Corporate information Section 2: Basis of preparation and other significant accounting policies 2A. Basis of preparation B. Significant accounting judgements, estimates and assumptions C. Changes in accounting policies and disclosures D. Summary of significant accounting policies Section 3: Group structure 3A. Interests in joint arrangements B. Group information and related party disclosures Section 4: Significant transactions and events 4A. Business combinations acquisitions Section 5: Results for the year 5A. Segment information B. Operating profit/(loss) C. Revenue D. Income tax E. Earnings per share Section 6: Invested capital 6A. Exploration and evaluation assets B. Mine properties C. Property, plant and equipment D. Intangible assets E. Impairment losses F. Commitments and other contingencies Section 7: Capital and debt structure 7A. Capital management B. Issued capital C. Financial instruments D. Changes in liaiblities arising from financing activities E. Dividends paid and proposed Section 8: Working capital 8A. Inventories B. Trade and other receivables C. Cash and short-term deposits D. Accounts payable and accrued liabilities Section 9: Other 9A. Provisions B. Contingencies C. Events after the reporting date D. Standards issued but not yet effective Good Mining (International) Limited 20

22 Section 1. Corporate and group information 1A. Corporate information The consolidated financial statements of Good Mining (International) Limited (Good Mining, the parent) and its subsidiaries (collectively, the Group) for the year ended 31 December 2017 were authorised for issue in accordance with a resolution of the directors on 27 January Good Mining is a limited company incorporated and domiciled in Metalville whose shares are publicly traded. The registered office is located at Gold Tower, Productivity Square, Metalcity, Metalville. The Group is principally engaged in the exploration for, development of and production of gold bullion and gold/copper concentrate. Information on the Group s parent and other related party relationships is presented in Note 3B. IAS 1.10(e) IAS 1.51(a),(b), (c) IAS (a) IAS IAS 1.138(b) IAS 1.138(c) Section 2. Basis of preparation and other significant accounting policies The identification of an entity s significant accounting policies is an important aspect of the financial statements. IAS requires the significant accounting policies disclosures to summarise the measurement basis (or bases) used in preparing the financial statements, and the other accounting policies used that are relevant to an understanding of the financial statements. The significant accounting policies disclosed in this note illustrate some of the more commonly applicable disclosures. However, it is essential that entities consider their specific circumstances when determining which accounting policies are significant and relevant and therefore need to be disclosed. This section provides additional information about the overall basis of preparation that the directors consider is useful to be relevant in understanding these financial statements. 2A. Basis of preparation 2A.1 Overview The consolidated financial statements of the Group have been prepared in accordance with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB). The consolidated financial statements have been prepared on a historical cost basis, except for derivative financial instruments and greenhouse gas emissions rights that have been measured at fair value. The consolidated financial statements are presented in US dollars and all values are rounded to the nearest million (US$ million), except where otherwise indicated. Entities in certain jurisdictions may be required to comply with IFRS approved by local laws and regulations. For example, listed companies in the European Union (EU) are required to comply with either IFRS as endorsed by the EU or IFRS as issued by the IASB. These financial statements only illustrate compliance with IFRS as issued by the IASB. 2A.2 Basis of consolidation The consolidated financial statements comprise the financial statements of Good Mining and its subsidiaries as at 31 December Subsidiaries are entities controlled by the Group. Control exists when the Group is exposed, or has rights, to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee. Specifically, the Group controls an investee if, and only if, the Group has all of the following: Power over the investee (i.e., existing rights that give it the current ability to direct the relevant activities of the investee) Exposure, or rights, to variable returns from its involvement with the investee The ability to use its power over the investee to affect its returns Generally, there is a presumption that a majority of voting rights results in control. When the Group has less than a majority of the voting, or similar, rights of an investee, it considers all relevant facts and circumstances in assessing whether it has power over an investee, including: The contractual arrangement(s) with the other vote holders of the investee Rights arising from other contractual arrangements The Group s voting rights and potential voting rights The relevant activities are those which significantly affect the subsidiary s returns. The ability to approve the operating and capital budget of a subsidiary and the ability to appoint key management personnel are decisions that demonstrate that the Group has the existing rights to direct the relevant activities of a subsidiary. IAS 1.112(a) IAS 1.16 IAS 1.117(a) IAS 1.51(d), (e) IFRS 10.7 IFRS 10.B38 21 Good Mining (International) Limited

23 2A. Basis of preparation continued 2A.2 Basis of consolidation continued The Group re-assesses whether or not it controls an investee if facts and circumstances indicate that there are changes to one or more of the three elements of control. Consolidation of a subsidiary begins when the Group obtains control over the subsidiary and ceases when the Group loses control of the subsidiary. Assets, liabilities, income and expenses of a subsidiary acquired or disposed of during the year are included in the statement of profit or loss and other comprehensive income from the date the Group gains control until the date the Group ceases to control the subsidiary. Where the Group s interest is less than 100 per cent, the interest attributable to outside shareholders is reflected in non-controlling interests (NCIs). Profit or loss and each component of other comprehensive income (OCI) are attributed to the equity holders of the parent of the Group and to the NCIs, even if this results in the non-controlling interests having a deficit balance. When necessary, adjustments are made to the financial statements of subsidiaries to bring their accounting policies in line with the Group s accounting policies. All intra-group assets and liabilities, equity, income, expenses and cash flows relating to transactions between members of the Group are eliminated in full on consolidation. A change in the ownership interest of a subsidiary, without a loss of control, is accounted for as an equity transaction. If the Group loses control over a subsidiary, it derecognises the related assets (including goodwill), liabilities, non-controlling interest and other components of equity, while any resultant gain or loss is recognised in profit or loss. Any investment retained is recognised at fair value. 2A.3 Foreign currencies The Group s consolidated financial statements are presented in US dollars, which is also the parent entity s functional currency and the Group s presentation currency. The Group does not have any foreign operations. Transactions in foreign currencies are initially recorded by each entity in the Group at their respective functional currency spot rates at the date the transaction first qualifies for recognition. Monetary assets and liabilities denominated in foreign currencies are translated at the functional currency spot rates of exchange at the reporting date. All differences are taken to the statement of profit or loss and other comprehensive income. Non-monetary items that are measured at historical cost in a foreign currency are translated using the exchange rates at the dates of the initial transaction. Non-monetary items measured at fair value in a foreign currency are translated using the exchange rates at the date when the fair value was determined. IFRS 10.B80 IFRS 10.B86(a) IFRS 10.B99 IFRS 10.B94 IFRS 10.B87 IFRS 10.B86(c) IFRS 10.B96 IFRS 10.B98 IFRS 10.B99 IAS 1.51(d) IAS IAS 21.23(a) IAS IAS 21.23(b) IAS 21.23(c) Significant judgement The functional currency for the parent entity and each of its subsidiaries and joint ventures, is the currency of the primary economic environment in which the entity operates. The functional currency of each entity in the Group is the US dollar. Determination of functional currency may involve certain judgements to identify the primary economic environment and the parent entity reconsiders the functional currency of its entities if there is a change in events and conditions which determined the primary economic environment. Many mining businesses have found that determining the functional currency of their operations is complicated. Determining the functional currency correctly is important because it will, for example: (1) affect volatility of revenue and operating profit resulting from exchange rate movements; (2) determine whether transactions can be hedged or not; (3) influence the identification of embedded currency derivatives; and (4) may give rise to temporary differences that affect profit or loss. While under IAS 21 The Effects of Changes in Foreign Exchange Rates, an entity may select any presentation currency, it does not have a free choice in determining its functional currency. Instead, IAS 21 requires an entity to consider the following factors in determining its functional currency: a) The currency that mainly influences sales prices for goods and services (this will often be the currency in which sales prices for its goods and services are denominated and settled) b) The currency of the country whose competitive forces and regulations mainly determine the sales prices of its goods and services c) The currency that mainly influences labour, material and other costs of providing goods or services (this will often be the currency in which such costs are denominated and settled) IAS 21.9 Good Mining (International) Limited 22

24 2A. Basis of preparation continued 2A.3 Foreign currencies continued continued While the currency referred to in (a) above will often be the currency in which sales prices for its goods and services are denominated and settled, this is not always the case. In the mining sector, the US dollar is often used as the contract or settlement currency in transactions (e.g., iron ore), but the pricing of transactions is often driven by factors unrelated to the US dollar (e.g., demand from China). When this is the case, management may conclude that the US dollar is not the currency that mainly influences the sales price. In the mining sector, which is international in nature, it is often difficult to determine the currency of the country whose competitive forces and regulations mainly determine the sales prices of its goods and services. Therefore, (b) above will often prove to be inconclusive when a particular mineral is mined in many different countries. It will generally be fairly straightforward to identify the currency that mainly influences an entity s key inputs (e.g., (c) above). In developing countries, an entity will often need to import a significant proportion of its key inputs (e.g., fuel, equipment and expatriate workers) and even local inputs in an economy with a high inflation rate will often be linked to the US dollar. In such a case, the local currency is less likely to be the main currency that influences an entity s key inputs. In most developed countries, however, the inputs tend to be denominated in the local currency, although some inputs (e.g., mining equipment) may be denominated in another currency. As the mining sector is capital intensive, the cost of equipment often far exceeds the operating expenses incurred. Given that equipment is often purchased in US dollars, even in developed countries, there is a general bias towards the US dollar as the functional currency. When the factors (a) to (c) above are mixed, as they often are in practice, and the functional currency is not obvious, management should use its judgement to determine the functional currency that most faithfully represents the economic effects of the underlying transactions, events and conditions. If the above factors are inconclusive, then an entity should also consider the following secondary factors: Currency in which funds from financing activities (i.e., issuing debt and equity instruments) are generated al currency of the reporting entity that has the foreign operation as its subsidiary, branch, associate or joint venture Even after considering both the primary and secondary factors, the functional currency of a mining entity may still not be obvious because, for example, its revenue is denominated in US dollars while virtually all expenses are denominated in its local currency. Nevertheless, even in that situation, management may conclude that revenue, while denominated in US dollars, is in fact, influenced by a basket of currencies. It is therefore possible that mining companies operating in a similar environment can reach different conclusions about their functional currency. From observation, it would appear that about half of the mining companies outside the United States have concluded that the US dollar is their functional currency. IAS 21 The Effects of Changes in Foreign Exchange Rates requires the functional currency to be determined by reference to factors that exist during the reporting period. Therefore, an entity should ignore future developments in its business, no matter how likely those developments are. For example, even if an entity is convinced that in three years' time it will have revenues that will be denominated in US dollars, this is not a factor to be considered in determining its functional currency today. IAS 21 requires an entity to determine separately the functional currency of each entity in a consolidated group. There is no such concept as the functional currency of the group, only a presentation currency. Therefore, the functional currency of an operating subsidiary may differ from the group's parent and/or foreign sales company to which it sells its production. Change in functional currency Once the functional currency is determined, IAS 21 allows it to be changed only if there is a change in those underlying transactions, events and conditions. Consequently, an entity may conclude that during the development phase of a project the local currency is its functional currency but that once production and sales commence the US dollar is then its functional currency. IAS IAS IAS IAS IAS IAS B. Significant accounting judgements, estimates and assumptions IAS 1.122, 125 The preparation of the Group s consolidated financial statements requires management to make judgements, estimates and assumptions that affect the reported amounts of revenues, expenses, assets and liabilities, and the accompanying disclosures, and the disclosure of contingent liabilities at the date of the consolidated financial statements. Estimates and assumptions are continually evaluated and are based on management s experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. Uncertainty about these assumptions and estimates could result in outcomes that require a material adjustment to the carrying amount of assets or liabilities affected in future periods. 23 Good Mining (International) Limited